Search Category: Sales Tax

Laws and Rules for Mining

Learn more about mining:

Learn more about Idaho tax statutes 

Learn more about our Rules 

Taxable Items – Lumber Manufacturing

The production exemption guide lists items that are always taxable. Taxable items that are specific to lumber manufacturers include:

  • Equipment and supplies used for filing blades, such as grinders and grinding wheels
  • Equipment used for loading lumber products onto railway cars and trucks
  • Generators used to produce electricity to power non-production equipment (co-generation equipment)
  • Equipment and materials used for shipping
    Examples:
    • Strapping or binders used to secure lumber on railroad cars or trucks
    • Airbags and lumber used as dunnage
  • Shop equipment and supplies used to make repairs
    Examples:
    • Hand tools
    • Power tools and compressors, including their accessories
    • Welders and cutting torches, including the gas you use to operate them
    • Solvents, cleaners, degreasers, shop rags
    • Paint, even if used for production equipment
  • Office, maintenance, or janitorial equipment and supplies
  • Marketing, promotional, sales, or transportation equipment and supplies
  • Equipment and supplies to analyze or model financial results

Motor vehicles

Any motor vehicle that’s required to be licensed for use on public roads is taxable. This includes vehicles with restricted-use plates and recreational-use stickers.

Change Use of Exempt Item – Lumber Manufacturing

If you change the primary use of an item

If you buy an item exempt to use in a lumber manufacturing activity, it becomes taxable if you stop using it in a lumber manufacturing activity. You must then pay tax on the fair market value of the item.

Note: The opposite isn’t true. If you pay tax on an item because you use it in a non-lumber manufacturing activity, you can’t claim a tax credit if you begin to use it in a lumber manufacturing activity.

Buyer’s Responsibility – Lumber Manufacturing

Buyer’s responsibility when making exempt purchases

You must keep records of all your purchases, and show whether you paid tax on them.

  • Records must show what you bought, when you bought it, how much you paid for the goods, and how much tax you paid.
  • Your accounting records must include the standard books and records maintained in a business.
  • Keep all your records for at least four years. (You may need to keep them for seven years if you don’t file sales tax returns.)

Use tax

When you buy, use, or store taxable goods in Idaho, but don’t pay sales tax when you buy them, you owe use tax.

You may owe use tax if:

  • You buy goods from an internet retailer that doesn’t collect tax
  • You buy a taxable item from a seller that didn’t charge sales tax because the seller has your exemption certificate on file
  • You buy an item in a state that doesn’t have sales tax, then bring the item to Idaho
  • You change how you use an exempt item. (See If you change the primary use of an item.)
  • You take lumber from your resale inventory and use it in your business.

Learn more about use tax on our Use Tax page.

Exemption Certificates – Lumber Manufacturing

To buy an item exempt from sales tax, give the seller a completed exemption certificate.

ST-101, Idaho Resale or Exemption Certificate

pdf Form ST-101 – Sales Tax Resale or Exemption Certificate

Fill in the form:

  1. Write the name and address of both the seller and your business at the top.
  2. In section 2 “Producer Exemptions,” check the box for the producer exemption(s) you qualify for.
  3. List any products you produce on the line at the bottom of section 2.
  4. Under “Buyer,” at the bottom of the page, sign the form. Fill in the rest of the fields (name, title, EIN or driver’s license information, and date).
  5. The seller should keep the form and not charge you tax on exempt items in the future.

Optional short version of ST-101

  • Retailers can print or stamp a short version of the ST-101 on sales invoices, or
  • Buyers can print the short version on their purchase orders.
  • This shorter version must be completed for each sale. The wording must be:

I certify that the property I’ve purchased will be used by me directly and primarily in the process of producing tangible personal property by mining, manufacturing, processing, fabricating, or farming, or as a repair part for equipment used primarily as described above. This tax exemption qualifies if this statement is signed by the buyer and the name, address, and nature of the buyer’s business are shown on the invoice. Any person who signs this certification with the intention of evading payment of tax is guilty of a misdemeanor.

[Indicate spaces for NATURE OF BUSINESS and SIGNATURE OF BUYER]

Retailers should keep a copy of the sales invoice showing the stamped or printed exemption.

Multijurisdictional

You can use the Uniform Sales and Use Tax Certificate – Multijurisdiction when you buy from out-of-state businesses that are registered Idaho retailers instead of Form ST-101 if:

  • You’re a multi-state taxpayer, and
  • You’ll resell the goods you buy

Instructions:

  1. Write the name and address of both the seller and your business at the top.
  2. Check the box for “Retailer” if you sell to end users or “Wholesaler” if you sell to buyers who’ll resell the goods.
  3. Write your Idaho seller’s permit number in the ID section.
  4. Sign and fill in the bottom of the form.
  5. The seller should keep the form and not charge you tax in the future.

Note: Everything you buy using the Multijurisdiction exemption certificate is exempt because you can use it only for goods you’ll resell.

Remember: Even if you buy from a seller that has your exemption certificate, not everything is exempt.

  • Some items are always taxable.
  • Some items are taxable if they’re not used in qualifying activities.

Sales by or to Lumber Manufacturers

Selling the lumber you manufacture

Wholesalers

If you only sell goods to a customer who will resell them, you may be a wholesaler. Read more in our Wholesalers guide.

Retailers

If you sell to a final consumer, you might be a retailer. Read more in our Retailers guide.

Examples of sales you must collect tax on if you’re a retailer:

  • Selling finished lumber to a contractor or employee
  • Selling finished lumber to buyers who don’t resell them
  • Selling firewood for bonfires or campfires
  • Selling equipment or promotional items to customers who don’t resell them

A retailer must get an Idaho seller’s permit, charge sales tax, file sales tax returns, and forward the tax to the Tax Commission.

Don’t charge tax if the goods you’re selling are:

  • Sold for resale, and the buyer gave you a completed pdf Form ST-101 – Sales Tax Resale or Exemption Certificate, or
  • Never taxed in Idaho
    Example: Firewood burned to provide heat to a building or for domestic home use isn’t taxable in Idaho. You might not need an Idaho seller’s permit if you only sell firewood for these purposes.

Vendors that sell to lumber manufacturers

  • If you sell to lumber manufacturers, don’t charge sales tax on exempt items if the buyer gives you a completed exemption certificate (e.g., ST-101).
  • If you have a completed certificate on file, don’t collect sales tax on exempt sales to the lumber manufacturer in the future.

Note: Not everything is exempt for lumber manufacturers. You must charge tax on items that aren’t exempt from sales tax. Read more on making sales in our Retailers guide.

Laws and Rules for Lumber Manufacturing

Learn more about exemptions for lumber manufacturing:

Learn more about Idaho tax statutes 

Learn more about our Rules 

Lumber Manufacturers That Qualify for Production Exemption

Businesses that qualify for the exemption

To be eligible for this exemption, your business must:

  • Engage in a qualifying lumber manufacturing activity. This includes manufacturing rough or finished lumber, such as sawmilling or lumber milling.
  • Devote the majority of your business operations to qualifying lumber manufacturing activities. Example: Spending more than 50% of the business’ working time and activities manufacturing rough or finished lumber.
  • Own the lumber you manufacture
  • Sell the lumber you manufacture
  • Report your business’ profit or loss on an income tax return.

Note: Custom sawmilling for someone else who owns the wood isn’t a qualifying activity.

Separately operated business segment

A separately operated business segment can also qualify. It can be a division, branch, or even a cost center. You must keep separate accounting records for the business segment to qualify as a separately operated business segment. This includes recording income, expenses, wages, and assets of the business segment separately. You must also have employees dedicated to operating the separate business segment.

Businesses that don’t qualify for the exemption

The lumber manufacturing exemption is only for businesses that devote the majority of their business operations to qualifying lumber manufacturing activities trying to make a profit.

  • It doesn’t include manufacturing of:
    • Plywood*
    • Particleboard*
    • Veneer*
    • Paper products*
  • Operations that aren’t eligible for the exemption include:
    • Lumber manufacturing as a hobby
    • Manufacturing lumber for personal use
    • Manufacturing lumber for use by your business

* Note: Although these manufacturing activities (plywood, particleboard, etc.) aren’t “lumber manufacturing,” they could qualify for the production exemption.

Purchases That Qualify for the Lumber Manufacturing Exemption

Purchase Requirements

An item qualifies for the exemption, if it meets all of the following requirements:

  • Primarily used in the lumber manufacturing process. (See Idaho Code section 63-3607A.)
  • Necessary or essential – you can’t manufacture lumber without it
  • Directly used in or consumed during lumber manufacturing – after the beginning and before the end of the process:
    • The lumber manufacturing process begins when you first handle logs at the processing plant or site
    • The process ends when the lumber is at the later point of
      – When you place it in storage, even temporarily, to be prepared for shipment or
      – When it’s ready to be sold in its final form
  • Tangible personal property – must not become real property
  • Allowable by law – must not be specifically excluded from the lumber manufacturing or production exemption by law or rule

Exempt Purchases — Lumber Manufacturing

The production exemption lists items that are exempt from tax. Qualifying lumber manufacturers can also buy the following items exempt:

Equipment used primarily to manufacture lumber

Examples:

  • Log loaders, log decks
  • Log pond items, including: Log loading equipment, boats moving logs from the storage area to the debarker
  • Chippers, saws, edgers, trimmers, planers, debarkers
  • Mill decks for grading and cutting lumber to length
  • Sprinkler equipment to prevent product deterioration
  • Dry kilns – including fire brick inside the kiln
  • Conveyor belts and equipment to move logs or lumber through the production process
  • Equipment to collect waste products used as “hog fuel” for the boiler
  • Boilers that produce steam to operate production equipment

Note: Items that become part of real property aren’t exempt

Generators

That produce electricity to power production equipment

Product packaging shipped to the customer

Examples:

  • Items that form a container for the lumber (e.g., lumber wrap, steel banding)

Pollution control equipment and materials

If they:

  • Are required* to meet air and water quality standards
  • Become part of the pollution control equipment, and
  • Are used to operate the pollution control equipment.

* The standards must be set by a state or federal agency that has authority to set them.

Examples of pollution control equipment that aren’t exempt:

  • Chemicals or other supplies that don’t become part of the equipment
  • A smoke stack, building, or other structure that merely houses the equipment

Producers That Qualify for Production Exemption

Businesses that qualify for the exemption

To be eligible for the production exemption, your business must:

  • Engage in a qualifying production activity
  • Own the goods you produce. (If you’re a custom farmer, custom rancher, contract miner, or an energy producer, you don’t have to own the goods that are produced.)
  • Sell the goods you produce. Either you or someone else must sell the goods at retail.
  • Be primarily devoted to qualifying production activities. One way many businesses satisfy this requirement is that they devote the majority of their business operations to qualifying production activities. Example: Spending more than 50% of the business’s working time and activities producing goods for sale.

A separately operated business segment can also qualify. It can be a division, branch, or even a cost center. You must keep separate accounting records for the business segment to qualify as a separately operated business segment. This includes recording income, expenses, wages, and assets of the business segment separately. You must also have employees dedicated to operating the separate business segment.

Businesses that don’t qualify for the exemption

Generally, retailers and other service-related businesses (such as restaurants and dry cleaners) don’t qualify. The production exemption is only for businesses that spend the majority of their time producing goods for sale.

Idaho law excludes the following businesses from the production exemption:

  • Utility companies delivering products through pipes, wires, or mains to the place where the customer will use the product
  • Publishers of tax-exempt literature
  • Contractors improving real property

The production exemption isn’t granted to individuals who don’t operate a business.